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Friday, January 21, 2011

GE reported better than expected earnings this morning. GE is a stock that I kick myself everyday for not buying 2 years ago when it was trading at $6. I have personally been short GE $20 Jan 12 puts and long GE Jan 13 $25 calls. These are still relatively cheap at .83 per contract and don't expire for 2 more years. It has runup today due to earnings, but look at adding some in any pullback. Perhaps finance them by selling some puts on something such XHB or even GE itself.

You can currently sell 1 Jan 12 $20 put and buy 1 Jan 13 $25 call for a $1.60 credit per contract. So rather than shelling out $2,000 dollras for 100 shares, you can do the above trade and receive $160 dollars and still participate in any upside until Jan 2013. The risk is you might have to take ownership of the stock at $20, but considering this is cheap for GE historically, this is not such a bad thing.